Hey everyone, this is Matt from the Sang Lucci team. I searched for gap-fill trades in tech names that had reported earnings, and I discovered $FVRR. In this post, I will discuss my trade and what I learned regarding illiquid options.
The Hunt Begins
The stock gapped down $50 off earnings and looked to be settling in and finding support. The gap began around $184, and I originally wanted to swing calls 60 days out between 50 and 60 delta. I wanted to wait for $FVRR to enter the gap before putting on the position, but I would look to scale out and roll up at each resistance level. The options are not liquid, and there are no weeklies, so this is more of a tactical mini-swing. I am currently looking at the Oct 175c (56 delta), but I will most likely need to re-adjust which strike I choose when $FVRR enters the gap.
I attached AVWAPS and have determined the following potential support and resistance levels:
- COVID lows: 165.93
- Recent lows: 169.55
- Aug 5 EPS: 172.51
- Recent highs: 181.86
- May 6 EPS: 197.03
- YTD anchor: 225.05
Waiting on $FVRR to enter the gapThe Gap Fakes Me Out
This morning, 8/30, I received a TradingView alert: $FVRR was preparing to cross over the AVWAP off the recent highs. I watched the price action and looked for it to enter the gap. However, the October calls were still illiquid with large spreads, so the September line appeared best for a feeler. $FVRR tested the 21d EMA and rejected it, but it closed over the recent AVWAP and was at a fib. If it broke below the 8d EMA, I would cut my feeler. Otherwise, I intended to add to my Sept 185c once it broke through the 21d EMA.
- Position entered on 8/30: $FVRR Sept 185 call
- Size: 1 lot
- Price: $9.30
Feeler position as $FVRR tests the gapI Get Slightly Chopped Up
I overpaid about 50% on my $FVRR feeler and worried I would have to take the loss and try again. But, unfortunately, I did not pay much attention to my alert at the 8d EMA, so I did not add to my position.
Finally, Movement!
As my premium decayed, I received a stroke of luck today, 9/13. $FVRR was incredibly strong despite the indices and big-tech names lagging: it was up $10 and still grinding higher. I asked Ronchero for his input regarding a speculative roll vs. keeping more of my original risk on. Ultimately, I reduced my exposure and rolled up my $FVRR call to a speculative lotto for this week’s expiration.
- Position closed on 9/13: $FVRR Sept 185 call
- Position entered on 9/13: $FVRR Sept 210 call
- Size: 1 lot
- Price: $0.93
Consolidation with a strong rally higherFinal Thoughts/Conclusion
While this trade did not net as much as I would have liked, it provided an excellent opportunity to practice trading less liquid names. I will continue to watch $FVRR and set alerts at potential support levels, assuming my speculative lotto goes to zero.
- Final $FVRR trade P/L: risked $930 to earn a net profit of $141.